30-Year Fixed Mortgage Rate Hits Yet Another Record Low, Falls Below 3.2 Percent for the First Time

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Abstract illustration of houses and charts

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Mortgage rates fall to lowest levels in months.

“Mortgage rates fell slightly again this week, pushing rates to their lowest level since mid-to-late February,” said Zillow Economist Matthew Speakman. “With few surprising economic data or pandemic-related developments this week, mortgage rates and the bond yields that tend to influence them saw little reason to move significantly over the past seven days. Unlike stocks, bonds and mortgage rates brushed aside comments made by Treasury Secretary Janet Yellen, in which she suggested (but did not recommend) that interest rates will likely have to rise somewhat in order to ensure that the economy doesn’t overheat. But this period of relative calm will be put to the test in the coming days. April employment figures and inflation data, two key gauges of the economy’s path forward, are due this week, and stronger-than-expected readings of either – or both – reports will likely revert mortgage rates back upward.”

Additionally, the 15-year fixed mortgage rate was 2.09%, and for 5/1 ARMs, the rate was 2.38%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.77% 2.82% 0.11%
20-Year Fixed 2.63% 2.71% 0.06%
15-Year Fixed 2.09% 2.17% 0.03%
10-Year Fixed 2.03% 2.15% -0.08%
7/1 ARM 2.22% 2.92% 0.26%
5/1 ARM 2.19% 3.04% 0.21%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.77% APR with a $75,000 down payment will have a monthly payment of $1,227. A 20-Year Fixed loan of $300,000 at 2.63% APR with a $75,000 down payment will have a monthly payment of $1,609. A 15-Year Fixed loan of $300,000 at 2.09% APR with a $75,000 down payment will have a monthly payment of $1,942. A 10-Year Fixed loan of $300,000 at 2.03% APR with a $75,000 down payment will have a monthly payment of $2,764. A 7/1 ARM loan of $300,000 at 2.22% APR with a $75,000 down payment will have a monthly payment of $1,141. A 5/1 ARM loan of $300,000 at 2.19% APR with a $75,000 down payment will have a monthly payment of $1,137. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.4% 3.07% 0.17%
30-Year Fixed VA 2.47% 2.73% 0.12%
15-Year Fixed FHA 2.23% 2.93% 0.09%
15-Year Fixed VA 2.42% 2.89% 0.17%
5/1 ARM FHA 2.59% 2.97% 0.02%
5/1 ARM VA 3.17% 2.83% -0.27%

A 30-Year Fixed FHA loan of $300,000 at 2.4% APR with a $75,000 down payment will have a monthly payment of $1,170. A 30-Year Fixed VA loan of $300,000 at 2.47% APR with a $75,000 down payment will have a monthly payment of $1,180. A 15-Year Fixed FHA loan of $300,000 at 2.23% APR with a $75,000 down payment will have a monthly payment of $1,962. A 15-Year Fixed VA loan of $300,000 at 2.42% APR with a $75,000 down payment will have a monthly payment of $1,988. A 5/1 ARM FHA loan of $300,000 at 2.59% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.17% APR with a $75,000 down payment will have a monthly payment of $1,291. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.2% 3.25% 0.09%
20-Year Fixed Jumbo 3.28% 3.32% 0.25%
15-Year Fixed Jumbo 2.81% 2.89% 0.11%
10-Year Fixed Jumbo 2.5% 2.6% 0.1%
7/1 ARM Jumbo 2.68% 3.17% -0.35%
5/1 ARM Jumbo 2.75% 3.21% -0.25%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.2% APR with a $150,000 down payment will have a monthly payment of $2,595. A 20-Year Fixed Jumbo loan of $600,000 at 3.28% APR with a $150,000 down payment will have a monthly payment of $3,411. A 15-Year Fixed Jumbo loan of $600,000 at 2.81% APR with a $150,000 down payment will have a monthly payment of $4,089. A 10-Year Fixed Jumbo loan of $600,000 at 2.5% APR with a $150,000 down payment will have a monthly payment of $5,656. A 7/1 ARM Jumbo loan of $600,000 at 2.68% APR with a $150,000 down payment will have a monthly payment of $2,428. A 5/1 ARM Jumbo loan of $600,000 at 2.75% APR with a $150,000 down payment will have a monthly payment of $2,449. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

30-Year Fixed Mortgage Rate Holds Steady

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Abstract illustration of houses and charts

As of May 5, the rate borrowers were quoted on Zillow for 30-year fixed mortgages was 2.72%.

Mortgage rates fall to lowest levels in months.

“Mortgage rates fell slightly again this week, pushing rates to their lowest level since mid-to-late February,” said Zillow Economist Matthew Speakman. “With few surprising economic data or pandemic-related developments this week, mortgage rates and the bond yields that tend to influence them saw little reason to move significantly over the past seven days. Unlike stocks, bonds and mortgage rates brushed aside comments made by Treasury Secretary Janet Yellen, in which she suggested (but did not recommend) that interest rates will likely have to rise somewhat in order to ensure that the economy doesn’t overheat. But this period of relative calm will be put to the test in the coming days. April employment figures and inflation data, two key gauges of the economy’s path forward, are due this week, and stronger-than-expected readings of either – or both – reports will likely revert mortgage rates back upward.”

Additionally, the 15-year fixed mortgage rate was 2.09%, and for 5/1 ARMs, the rate was 2.38%.

Check Zillow for mortgage rate trends and up-to-the-minute mortgage rates for your state, or use the mortgage calculator to calculate monthly payments at the current rates.

The weekly mortgage rate chart above illustrates the average 30-year fixed interest rate for the past week. Here’s a comprehensive look at the current mortgage rates for all loan types:

Today’s Average Rates for Conventional Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed 2.79% 2.84% 0.09%
20-Year Fixed 2.66% 2.73% 0.04%
15-Year Fixed 2.1% 2.19% 0.02%
10-Year Fixed 2.03% 2.15% -0.08%
7/1 ARM 2.24% 2.94% 0.24%
5/1 ARM 2.27% 3.08% 0.17%
3/1 ARM 0% 0% 0%

A 30-Year Fixed loan of $300,000 at 2.79% APR with a $75,000 down payment will have a monthly payment of $1,231. A 20-Year Fixed loan of $300,000 at 2.66% APR with a $75,000 down payment will have a monthly payment of $1,612. A 15-Year Fixed loan of $300,000 at 2.1% APR with a $75,000 down payment will have a monthly payment of $1,944. A 10-Year Fixed loan of $300,000 at 2.03% APR with a $75,000 down payment will have a monthly payment of $2,764. A 7/1 ARM loan of $300,000 at 2.24% APR with a $75,000 down payment will have a monthly payment of $1,144. A 5/1 ARM loan of $300,000 at 2.27% APR with a $75,000 down payment will have a monthly payment of $1,149. A 3/1 ARM loan of $0 at 0% APR with a $0 down payment will have a monthly payment of $0. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Government Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed FHA 2.41% 3.07% 0.16%
30-Year Fixed VA 2.49% 2.75% 0.1%
15-Year Fixed FHA 2.23% 2.94% 0.08%
15-Year Fixed VA 2.42% 2.89% 0.17%
5/1 ARM FHA 2.59% 2.97% 0.02%
5/1 ARM VA 3.09% 2.77% -0.22%

A 30-Year Fixed FHA loan of $300,000 at 2.41% APR with a $75,000 down payment will have a monthly payment of $1,170. A 30-Year Fixed VA loan of $300,000 at 2.49% APR with a $75,000 down payment will have a monthly payment of $1,183. A 15-Year Fixed FHA loan of $300,000 at 2.23% APR with a $75,000 down payment will have a monthly payment of $1,962. A 15-Year Fixed VA loan of $300,000 at 2.42% APR with a $75,000 down payment will have a monthly payment of $1,989. A 5/1 ARM FHA loan of $300,000 at 2.59% APR with a $75,000 down payment will have a monthly payment of $1,200. A 5/1 ARM VA loan of $300,000 at 3.09% APR with a $75,000 down payment will have a monthly payment of $1,279. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Today’s Average Rates for Jumbo Loans

Program Interest Rate APR 1 Wk Change
30-Year Fixed Jumbo 3.24% 3.28% 0.06%
20-Year Fixed Jumbo 3.3% 3.34% 0.23%
15-Year Fixed Jumbo 2.83% 2.9% 0.09%
10-Year Fixed Jumbo 2.5% 2.6% 0.1%
7/1 ARM Jumbo 2.65% 3.1% -0.28%
5/1 ARM Jumbo 2.66% 3.15% -0.18%
3/1 ARM Jumbo 2.14% 2.74% 0%

A 30-Year Fixed Jumbo loan of $600,000 at 3.24% APR with a $150,000 down payment will have a monthly payment of $2,606. A 20-Year Fixed Jumbo loan of $600,000 at 3.3% APR with a $150,000 down payment will have a monthly payment of $3,416. A 15-Year Fixed Jumbo loan of $600,000 at 2.83% APR with a $150,000 down payment will have a monthly payment of $4,093. A 10-Year Fixed Jumbo loan of $600,000 at 2.5% APR with a $150,000 down payment will have a monthly payment of $5,656. A 7/1 ARM Jumbo loan of $600,000 at 2.65% APR with a $150,000 down payment will have a monthly payment of $2,418. A 5/1 ARM Jumbo loan of $600,000 at 2.66% APR with a $150,000 down payment will have a monthly payment of $2,420. A 3/1 ARM Jumbo loan of $600,000 at 2.14% APR with a $150,000 down payment will have a monthly payment of $2,259. All monthly payments displayed assume a maximum Loan to Value (LTV) of 80% and 740 credit score, and do not include amount for taxes and insurance. The actual monthly payment may be greater.

Source: zillow.com

7 Things to Do After College Besides Work

Numerous college students have a trajectory in mind for navigating life after college. For some, getting a job is their top goal. But, are there other things to do after college besides work?

Beyond looking for a traditional entry-level job, there are alternative choices for new grads—including internships, volunteering, grad school, spending time abroad, or serving in Americorps.

Naturally, the options available will differ depending on each person’s situation, as not all alternatives to work come with a paycheck attached.

Here’s a look at these seven things to do after college besides work.

1. Pursuing Internships

One popular alternative to working right after college is finding an internship. Generally, internships are temporary work opportunities, which are sometimes, but not always, paid.

Internships may give recent grads a chance to build up hands-on experience in a field or industry they believe they’re interested in working in full time. For some people, it could help determine whether the reality of working in a given sector meets their expectations.

Whatever grads learn during an internship, having on-the-job experience (even for those who opt to pursue a different career path) could make a job seeker stand out afterwards. Internships can help beef up a resume, especially for recent grads who don’t have much formal job experience.

A potential perk of internships is the chance to further grow your professional network—building relationships with more experienced workers in a particular department or job. Some interns may even be able to turn their short-term internship roles into a full-time position at the same company.

Starting out in an internship can be a great way for graduates to enter the workforce, “road testing” a specific job role or company.

2. Serving with AmeriCorps

Some graduates want to spend their time after college contributing to the greater good of American society. One possible option here is the Americorps program—supported by the US Federal Government.

So, what exactly is Americorps? Americorps is a national service program dedicated to improving lives and fostering civic engagement. There are three main programs that graduates can join in AmeriCorps: AmeriCorps NCCC, AmeriCorps State and National, and AmeriCorps Vista.

There’s a wide variety of options in AmeriCorps, when it comes to how you can serve. Graduates can work in emergency management, help fight poverty, or work in a classroom.

However graduates decide to serve through AmeriCorps, it may provide them with a rewarding professional experience and insights into a potential career.

Practically, Americorps members may also qualify for benefits such as student loan deferment, a living allowance, education awards (upon finishing their service), and skills training.

It may sound a bit dramatic, but AmeriCorps’ slogan is “Be the greater good.” Giving back to society could be a powerful way to spend some time after graduating—supporting organizations in need, while also establishing new professional connections.

3. Attending Grad School

When entering the workforce, graduates may encounter job postings with detailed employment requirements.

Some jobs require just a Bachelor’s degree, while others require a Master’s–think, for instance, of being a lawyer or medical doctor. Depending on their field of study and career goals, some students may opt to go right to graduate school after receiving their undergraduate degrees.

The number of jobs that expect graduate degrees is increasing in the US. Graduates might want to research their desired career fields and see if it’s common for people in these roles to need a master’s or terminal degree.

Some students may wish to take a break in between undergrad and grad school, while others find it easier to go straight through. This choice will vary from student to student, depending on the energy they have to continue school as well as their financial ability to attend graduate school.

Graduate school will be a commitment of time, energy and money. So, it’s advisable that students feel confident that a graduate degree is necessary for the line of work they’d like to end up in before they apply or enroll.

4. Volunteering for a Cause

Volunteering could be a great way for graduates to gain some extra skills before applying for a full-time job. Doing volunteer work may help graduates polish some essential soft skills, like interpersonal communication, interacting with clients or service recipients, and time management.

Another potential benefit to volunteering is the ability to network and forge new connections outside of college. The people-to-people connections made while volunteering could lead to mentorship and job offers.

Volunteering is something graduates can do after college besides work, while still fleshing out their resume or skills.

New grads may want to volunteer at an institution or organization that syncs with their values or, perhaps, pursue opportunities in sectors of the economy where they’d like to work later on (i.e., at a hospital).

On top of all these potential plus sides, volunteering just feels good. It makes people feel happier. And, after all of the stress that accompanies finishing up college, volunteering afterward could be the perfect way to recharge.

5. Serving Abroad

Similar to the last option, volunteering abroad can be attractive to some graduates. It may help grads gain similar skills they’d learn volunteering here at home, while also giving them the opportunity to learn how to interact with people from different cultures, try to learn a new language, and see new perspectives on solving problems.

Though it can be beneficial to the volunteers, volunteering abroad isn’t always as ethical as it seems. And, not all volunteering opportunities always benefit the local community.

It could take research to find organizations that are doing ethically responsible work abroad. One key thing to look for is organizations that put the locals first and have them directly involved in the work.

6. Taking a Gap Year

According to the Gap Year Association , a gap year is “a semester or year of experiential learning, typically taken after high school and prior to career or post-secondary education, in order to deepen one’s practical, professional, and personal awareness.”

While a gap year is generally taken after high school or after college, one common purpose of the gap year is to take the time to learn more about oneself and the world at large—which can be beneficial after graduating from college and trying to figure out what to do next.

Not only might a gap year help grads build insights into what they’d like to do with their later careers, it may also help them home in on a greater purpose in life or build connections that could lead to future job opportunities.

Graduates might want to spend a gap year doing a variety of activities—including:

•   trying out seasonal jobs
•   volunteering
•   interning
•   teaching or tutoring
•   traveling

A gap year can be whatever the graduate thinks will be most beneficial for them.

7. Traveling Before Working

Going on a trip after graduation is a popular choice for graduates that can afford to travel after college. Traveling can be expensive, so graduates may want to budget in advance (if they want to have this experience post-graduation.

On top of just being really fun, travel can have beneficial impacts for an individual’s stress levels and mental health. Research from Cornell University published in 2014 suggests that the anticipation of planning a trip might have the potential to increase happiness.

Traveling after graduation is a convenient time to start ticking locations off that bucket list, because graduates won’t be held back by a limited vacation time. Going abroad before working can give students more time and flexibility to travel as much as they’d like (and can afford to!).

With proper research, graduates can find more affordable ways to travel—such as a multi-country rail pass, etc. It doesn’t have to be all luxury all the time. Budget travel is possible especially when making conscious decisions, like staying in hostels and using public transportation.

If graduates are determined to travel before working, they can accomplish this by saving money and budgeting well.

Navigating Post Graduation Decisions

Whether a recent grad opt to start their careers off right away or to pursue one of the above-mentioned things to do after college besides work, student loans are something that millions of university students have taken out.

After graduating (or if you’ve dropped below half-time enrollment or left school), the reality of paying back student loans sets in. The exact moment that grads will have to begin paying off their student loans will vary by the type of loan.

For federal loans, there are a couple of different times that repayment begins. Students who took out a Direct Subsidized, Direct Unsubsidized, or Federal Family Education Loan, will all have a six month grace period before they’re required to make payments. Students who took out a Perkins loan will have a nine month grace period.

When it comes to the PLUS loan, it depends on the type of student that’s taken one out. Undergraduates will be required to start repayment as soon as the loan is paid out. Graduate and professional students with PLUS loans will be on automatic deferment while they’re in school and up to six months after graduating.

Some graduates opt to refinance their student loans. What does that mean? Well, refinancing student loans is when a lender pays off the existing loan with another loan that has a new interest rate. Refinancing can potentially lower monthly loan repayments or reduce the amount spent on interest over the life of the loan.

Both US federal and private student loans can be refinanced, but when federal student loans are refinanced by a private lender, the borrower forfeits guaranteed federal benefits—including loan forgiveness, deferment and forbearance, and income-driven repayment options.

Refinancing student loans may reduce money paid to interest. For graduates who have secured well-paying jobs and have improved their credit score since taking out their student loan, refinancing could come with a competitive interest rate and different repayment terms.

Graduating from college means officially entering the realm of adulthood, but that transition can take many forms. There are various financial tips that recent graduates may opt to look into.

Thinking about refinancing your student loans? With SoFi, you could get prequalified in just two minutes.



External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF SEPTEMBER DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs.
SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. SoFi Lending Corp. and its lending products are not endorsed by or directly affiliated with any college or university unless otherwise disclosed.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. A hard credit pull, which may impact your credit score, is required if you apply for a SoFi product after being pre-qualified.

SOSL20035

Source: sofi.com

How long does it take to get a credit card? – Lexington Law

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

If you’re considering getting a new credit card, you may be wondering how long you’ll have to wait before you can start using your card and building credit. Typically, it takes a few weeks from the time of application to receive the card in the mail. To determine the specifics, it’s important to understand the three stages of acquiring a credit card: application, approval and mailing.

Most of the time, applying and getting approved for a card happens within a matter of minutes. The main holdup is waiting for the card to come in the mail, which may take up to 10 business days. You may also spend more time waiting if you applied for a card that requires exceptional credit, which requires issuers to manually review your application and credit history.

How long does it take to get a credit card? Application time takes less than hour, approval time ranges from minutes to weeks, and mailing time ranges from 5 to 10 business days.

Step 1: Apply Online

Total wait time: Less than an hour

How to Apply for a Credit Card

When you apply for a credit card online, you’ll need to enter personal information like your name, address, income, employment status and identification info, like a Social Security number. Within minutes, you’ll likely receive an approval or denial, because most credit cards have preset approval criteria.

Getting Preapproved

Getting preapproved or prequalified for a credit card will help you get a card faster because it automates the approval process. You may either receive a preapproval offer in the mail or complete an online form with some personal and financial information. Filling out preapproval forms doesn’t have any impact on your credit score and allows your credit card offers to be more personalized.

Step 2: Get Approved

Total wait time: Anywhere from a few minutes to a few weeks

How Does the Credit Approval Process Work?

If you are preapproved or apply for credit cards with preset criteria, you’ll likely know if you’re approved or denied within minutes. However, if you apply for a credit card that requires exceptional credit, you won’t receive an instant verdict. This is because the credit card issuer must manually review your application and credit history. This can take anywhere from a few days to a week or longer. They may look at:

  • Negative items: Derogatory marks like late payments and delinquent accounts
  • Debt load: Including your debt-to-income ratio and credit utilization ratio
  • Credit score: A high-level indication of your credit health

How to Check Your Application Status

If you’re waiting on a mail-in application or approval that’s hard to get due to high standards, you may be able to check your application’s status online. Most major credit card issuers—except Capital One, Chase and Synchrony—allow users to check their application status online. If that option isn’t available to you, or if you prefer talking to someone, call the issuer’s card services number.

How to Increase Your Chances of Approval

Make sure to only apply for credit cards with criteria that fit your credit health. For example, some credit cards are designed for people with bad credit, while others require excellent credit. Overall, if you don’t have much credit history or if you have bad credit, you likely won’t be approved for cards with great rewards and interest rates.

Step 3: Receive Card

Total wait time: Five to 10 business days

How Long Does It Take for Credit Cards to Come in the Mail?

Unless you applied for a card requiring excellent credit, most of the waiting time is eaten up by the mailing process, which typically takes five to 10 business days.

What to Do If My Card Is Taking Longer Than Expected

If you urgently need the card or are wondering what’s taking so long, consider doing the following:

  • Request an expedite. Expedited delivery for new and replacement cards is offered by many issuers—and sometimes, it’s even free.
  • Track the card. This won’t help the card arrive faster, but it will give you a better idea of its progress. You can either check the card’s status online or call the issuer using a tracking number. This will help you learn when the card was sent and when you can expect it to arrive.
  • Call the issuer. If it’s been more than 10 business days or the amount of time estimated for delivery, your card may have gotten lost in the mail, or even stolen. Consider calling your issuer and requesting that they cancel the old card and issue a new one. Even though this will take longer, it’s a wise safety measure.
Credit card taking longer than expected to arrive? Request an expedite, track the card, call the issuer.

Can I Use My Card Before It Arrives?

If you need to pay bills or make important transactions before your card is scheduled to arrive in the mail, you may be able to access your card number immediately after approval. Check with your issuer to see if it offers this feature, and request an instant card number as soon as you’ve been approved. Applying and getting approved for a credit card has never been easier, especially if you’ve been practicing good credit management. Remember to use your new card responsibly to keep your credit score in the best shape possible. And remember that we’re here to help with credit repair if things happen that are outside of your control, like unfair or inaccurate reporting. Talk to us today to get started.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

What is a Credit Check

Credit checks have become extremely common these days, especially following the economic collapse several years ago, and it’s important that you know what a credit check is and how it can affect your credit score. Credit checks are performed by lenders, borrowers or other entity who may have something to risk or lose should you have poor credit worthiness. The credit check usually contains information about yourself, like your social security number, date of birth, employment history, and will also contain information about your credit history and credit worthiness. The lender or borrower will run a credit check on you to determine the level of risk involved in providing a loan to you.

Some of the most common reasons you be asked to agree to a credit check is when applying for a credit card, loan, or mortgage, buying a car or renting a car. There are numerous other reason, though, that you may be required to have your credit checked and it has started to become more and more common to see phone service providers, electric companies, apartment complexes, and even some employment opportunities require a credit check.

denied creditdenied creditBeing Denied After a Credit Check

A truly embarrassing and frustrating result of a credit check is when the credit check results in the lender denying you. This can happen for many reasons, most commonly due to a bad credit score, but could also be because of recent credit turbulence (bankruptcy, foreclosure, repo, ect…) or past problems with similar lenders (e.g. if you’re applying for a credit card and you have a history of late payments or outstanding balances with other credit cards, your credit check may come back declined).

If you’ve been denied credit or a loan due to a credit check, be wary of going to other lenders in an attempt to find one who will approve you. Each time your credit is checked your credit score could go down which would just hinder your chances of being approved even further. You should avoid having your credit checked more than once per year, otherwise it could negatively affect your credit score which is detrimental to getting approved and keeping your interest rates low.

How to Prevent Being Denied After a Credit Check

As you will find in any adult life, credit checks are almost always inevitable and you’re bound to have to deal with them one way or another. Naturally, when facing a credit check, you’ll want to make sure that your credit is pristine, leading to a positive result and an approved credit check. This may be easy if you’ve already built up a perfect credit score and have an all-around good credit history, however, if your credit score is low or you have had issues with your credit in the past, this may be more difficult. So how do you rebuild your credit score and repair past credit mistakes? You can and should certainly make sure to follow the best practices of rebuilding your credit but if you want to repair your credit quickly, the fastest way is to speak with a credit repair expert who can help you dispute negative items on your credit report to have them removed all together.

To learn more about how you can dispute negative items on your credit report and get them removed, resulting in a higher credit score and an increased chance of being approved on your next credit check, contact Credit Absolute for a free consultation.

Source: creditabsolute.com

Common Credit Score Mistakes

Here at Credit Absolute we’ve helped our fair share of clients who have just been dealt a bad hand and everything went bad at once, destroying their credit score.

One of the more extreme case was with one of our clients who had been laid off during the recent recession. This caused him get behind on car and mortgage payments for several months before finally going into foreclosure, having his car repossessed, and maxed out credit cards.  This left him drowning in debt and when he finally found new employment, the previous lenders began garnishing his wages, making it nearly impossible to pay his current bills, let alone pay off old debt. He was then forced to file bankruptcy and is now working to rebuild his credit after years of bad luck ruined his credit.

There are definitely situations like this that may be out of your control and your bad credit score may just be the result of bad luck, but in most cases it has more to do with poor credit habits and common credit mistakes. While derogatory marks on your credit report do eventually fall off, it does take awhile. So it’s important to make sure you avoid these common mistakes.

Common Credit Score Mistakes That Can Kill Your Credit Score

While some unforeseen circumstances may be unavoidable, there are quite a few different things that can negatively affect your credit score and should be avoided whenever possible. Here are a few common mistakes that people with low credit scores tend to make:

  • You Close Old Credit Card Accounts

A large part of your credit score is determined by your credit history and by keeping your old credit cards can help improve your credit score. You will still need to occasionally use those cards to keep them “active” but you definitely don’t want to close out old cards.

  • You Take Too Long To Shop For The Best Rate

This is a very common mistake among new home and car buyers who have been advised to shop around for the best rates. While it is definitely recommended to search around for the best rates when buying a car or home, you want to avoid having your credit checked numerous times by shopping too long for a good rate. One tip to help avoid this mistake is by working with a mortgage broker; they can run your credit once but will still have access to numerous mortgage companies in order to find you the best rate without having to re-run your credit for every lender.

  • You Don’t Use Credit, Even Though You Have Access To It

Sadly, this happens far too often and, while it may not hurt your credit, it is a lost opportunity that could be helping you maintain a good credit score. If you have credit cards that you’ve perhaps had for years and no longer use, you’re missing out on a great opportunity to improve your credit. Credit that isn’t being used won’t help your credit score so make sure that you’re using your credit card at least a few times a year to ensure it stays “active” and continues to benefit your score.

  • You Max Out Your Credit Cards

While this mistake isn’t always done intentionally – many people max out their credit cards because of unexpected financial burdens – many people are unaware that they are severely hurting their credit score by maxing out a credit card. Try to avoid using more than 50% of your available credit (preferably less than 30%) to maintain a good debt to credit ratio which will help increase your credit score.

  • You Became A Co-Signer

This can be a sensitive matter of conversation because co-signing often involves two people who are very close and trust each other enough to risk their credit on behalf of the other. Unfortunately, many people haphazardly co-sign without a second thought and without considering the implications of the matter. Before co-signing, make sure that the person you’re co-signing for isn’t a likely risk of delinquency. If they stop paying, you start paying with bad credit – you could also be held accountable for the remainder of the debt as well.

  • You Don’t Worry About “Just One” Missed Payment

According to FICO, “Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores.”

Far too often people will neglect to pay their bills on time simply because they forget to, are too busy, or simply don’t think it’s a big deal if they’re just a few days late. Unfortunately this can severely impact your credit score, lowering it substantially. Avoid late payments whenever possible and set reminders if you have the tendency to forget.

Rebuild Your Credit

Whether you’ve been the subject of Murphy’s Law and been rained on with horribly bad luck, resulting in a low credit score, or you’ve just inadvertently made some poor choices that have caused your score to drop, Credit Absolute can help rebuild your credit score quickly and affordably. Don’t continue to be dragged down by poor credit and high interest rates, contact us today for a free consultation!

Source: creditabsolute.com

Paying taxes as a freelancer

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

Paying taxes as a freelancer can be a bit more involved—and expensive—than paying taxes as a W-2 employee. When you’re a freelancer, you’re the boss. That’s great if you want some flexibility, but it also means you’re self-employed, so you are responsible for both the employer and employee parts of employment taxes.

When you work for someone else, your paycheck amount is your pay minus all appropriate deductions. That includes deductions for federal and state income taxes as well as Medicare and Social Security contributions.

But what you might not realize is that your employer covers part of the Medicare and Social Security amounts. As a self-employed individual, you have to pay the total amount yourself. That’s 12.4 percent for Social Security and 2.9 percent for Medicare—a total of 15.3 percent of your taxable earnings, not including federal and other income taxes.

When Do I Have to Start Paying Taxes as a Freelancer?

According to the Internal Revenue Service, if you earn $400 or more in a year via self-employment or contract work, you must claim the income and pay taxes on it. The threshold is even lower if you earn the money for church work. If you earn more than $108.28 as a church employee and the church employer doesn’t withhold and pay employment taxes, you must do so.

What Tax Forms Should I Know About?

Freelancers report their income to the IRS using a Form 1040, but they may need to include a variety of Schedule attachments, including:

  • Schedule A, which lists itemized deductions
  • Schedule C, which reports profits or losses from their freelancer business
  • Schedule SE, which calculates self-employment tax

These are only some of the forms that might be relevant to a freelancer filing federal taxes. Freelancers must also file a tax form for the state in which they live as well as with any local governments that require income tax payments.

If you’re planning to do your taxes on your own as a freelancer, it might be helpful to invest in DIY tax software. Look for options that cater specifically to home and business or self-employment situations. These software programs typically walk you through a series of questions designed to determine which forms you need to file and help you complete those forms correctly.

Six Tips for Doing Your Taxes as a Freelancer

As a freelancer, chances are you spend a lot of your time attending to clients and getting production work done. You may not have a lot of time for business organization tasks such as accounting. But a proactive approach to paying taxes as a freelancer can help you prepare to do your taxes and pay what can be a surprisingly big bill each year.

Here are six tips for handling taxes as a freelancer.

1. Keep Track of Your Income

Track your income so you know how much you may need to pay in taxes every year. Keeping track of your numbers also helps you understand whether your business is profitable and how you’re doing with income compared to past years.

You can track your income in a number of ways. Apps and software programs such as QuickBooks and Wave let you manage your freelance invoices and track income and expenses. Some also help you generate financial reports that might be helpful come tax time.

Alternatively, you can track your income in an Excel spreadsheet or even a notebook, as long as you’re consistent with writing everything down.

2. Set Money Aside in Advance

It’s tempting to count every dollar that comes in as money you can use. But it’s wiser to set money aside for taxes in advance. Depending on how much you earn as a freelancer, you could owe thousands in federal and state taxes by the end of the year, and if you didn’t plan ahead, you might not have the money to cover the tax bill.

That can lead to tax debt that comes with pretty stiff penalties and interest—and the potential for a tax lien if you can’t pay the bill.

3. Determine Your Business Structure

Make sure you know what your business structure is. Many freelancers operate as sole proprietorships. But you might be able to get a tax break if you operate as an LLC or a corporation. Talk to legal and tax professionals as you set up your business to find out about the pros and cons of each type of organization.

4. Know About Relevant Deductions

As a freelancer, you may be able to take certain federal tax deductions to save yourself some money. Tax deductions reduce how much of your income is considered taxable, which, in turn, reduces how much you owe in taxes. Here are a few common deductions that might be relevant to you as a freelancer.

Home Office

You can take the home office deduction if you’ve set aside a certain area of your home for use by the business. The IRS does have a couple of stipulations.

First, you have to regularly use the space for your business, and it can’t be something you use regularly for other purposes. For example, you can’t claim your dining room as a home office just because you sometimes work from that location.

Second, the home has to be your principal place of business, which means it’s where you do most business activity. You can’t claim the deduction if you normally work outside the home but sometimes answer work emails while you’re in the living room.

Equipment and Supplies

You can also deduct the cost of equipment and supplies that you buy for your business. That includes software purchases and relevant subscriptions, such as if you pay monthly for Microsoft 365 or annually for a domain name.

Make sure you have backup documentation for any business expenses you deduct. That means keeping receipts that show what you purchased so you can prove that the expenses were for business. You also have to be careful to keep business and personal expenses separate—art supplies for your child’s school project, for example, wouldn’t typically be considered valid business expenses.

Travel and Meals

Meals and travel expenses that are related to your business may be tax deductible. If you stay in a hotel, book a flight or incur other travel expenses that are necessary for the running of your business, you can claim them as a deduction. The same is true for 50 percent of the value of meals and beverages that you pay for as a necessity when doing business.

The IRS does set an “ordinary and necessary” rule here. For example, if you’re traveling to meet with a client and you need to eat lunch, that is likely to be considered necessary. But if you opt for a very lavish meal for no other purpose than to do so, it might not be allowed under the “ordinary” part of the rule.

Business Insurance

If you carry liability or similar insurance for your business, you can deduct it as a cost of doing business. You may also be able to deduct the cost of other insurance policies if they are necessary for your trade.

5. Estimate Your Taxes Quarterly

The IRS offers provisions for estimating your employment taxes on a quarterly basis. Self-employed individuals, including freelancers, can make these estimated tax payments, too. Paying as you go means you won’t owe a large sum every April, and if you overestimate, you may get a tax refund.

Quarterly payments are due in April, June, September and January. They can be mailed or made online. Depending on how much you earn, you may need to make quarterly estimated tax payments to avoid a penalty at the end of the year.

6. Consult a Tax Professional

As you can see just from the basic information and tips above, paying taxes as a freelancer can get complicated quickly. Consider talking to a tax professional to understand what all your obligations are and how best to reduce your tax burden using legal deductions. You might be missing a major deduction every year that could save you a lot of money.

And remember that as a freelancer, you’re running your own small business. That means paying attention to all your finances, including your credit report. If you ever want to take out a business loan or seek other funding to grow your business, you might need to rely on your good credit score.

Check your credit score, and if you find inaccurate negative information making an impact on your score, contact Lexington Law to find out how to get help disputing it.


Reviewed by Cynthia Thaxton, Lexington Law Firm Attorney. Written by Lexington Law.

Cynthia Thaxton has been with Lexington Law Firm since 2014. She attended The College of William and Mary in Williamsburg, Virginia where she graduated summa cum laude with a degree in International Relations and a minor in Arabic. Cynthia then attended law school at George Mason University School of Law, where she served as Senior Articles Editor of the George Mason Law Review and graduated cum laude. Cynthia is licensed to practice law in Utah and North Carolina.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Source: lexingtonlaw.com

The 9 Top Reasons Mortgage Loans Are Denied in the U.S.

Although interest rates have inched up recently, they remain at historic lows, spurring demand in both home purchases and mortgage refinancing. However, many lenders have tightened up their borrowing standards due to the economic uncertainty of the pandemic, and hopeful loan applicants may find it hard to get approved. According to loan-level mortgage data from the Home Mortgage Disclosure Act, the denial rate for conventional, single-family loans was 18.8% (excluding withdrawn and incomplete applications) in 2019.

Mortgage application denial rates vary by purpose of the loan. When considering total loan applications for conventional, single-family loans, 2,055,774 applications were denied. At 43%, denial rates were highest for home improvement loans. Loans for home purchases had the lowest denial rate, at just 10%. Refinancing applications, both with and without a cash-out component, had denial rates in between, at 16% for non-cash-out and 18% for cash-out refinance loans.

Mortgage application denial rates vary not only by purpose of the loan but also by the race and ethnicity of the applicant. Non-Hispanic White applicants and co-applicants of different races (“Joint”) had the lowest denial rates at 17%. Black, American Indian or Alaskan Native, and applicants of two or more minority races all had a denial rate that was more than twice as high as that for White applicants. Hispanic or Latino borrowers also had high denial rates, at nearly 30%. The difference in denial rates reflects differences in credit profiles and application types across different demographic groups, but it also may reflect racial and ethnic discrimination in lending behavior.

Loan approvals and denials also vary widely by location. Denial rates skew higher in the South, Southeast, and parts of the Northeast, while denial rates are much lower in the Midwest. This could be due to varying demographic makeups and local job market conditions. At the state level, Mississippi and Florida have the highest mortgage denial rates in the U.S. at 27.3% and 25%, respectively. At the opposite end of the spectrum, North Dakota has the lowest mortgage denial rate in the country, at just 10.2%.

To find the top reasons mortgage loans are denied, researchers at Construction Coverage analyzed the latest data from the Home Mortgage Disclosure Act. The researchers ranked reasons mortgage loans are denied based on the percentage of all denials mentioning each reason. For each reason that mortgage loans are denied, researchers also calculated the total annual denials and the percentage of denials that were due to that reason for several loan types: home purchase, refinancing, cash-out refinancing, and home improvement.

The Top Reasons Mortgage Loans Are Denied

Couple stressed about bills

Photo Credit: Alamy Stock Photo

1. Debt-to-income ratio

  • Percentage of all denials: 37.2%
  • Total annual denials: 765,772
  • Percentage of home purchase denials: 36.2%
  • Percentage of refinancing denials: 38.0%
  • Percentage of cash-out refinancing denials: 35.4%
  • Percentage of home improvement denials: 37.2%

The debt-to-income ratio (DTI) ratio is the share of gross monthly income (pre-tax) that goes towards debt payments (rent or mortgage, car payment, credit cards, student loans, etc.). A lower DTI can help applicants get approved for a mortgage.

Paying with a credit card

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2. Credit history

  • Percentage of all denials: 34.8%
  • Total annual denials: 715,393
  • Percentage of home purchase denials: 34.2%
  • Percentage of refinancing denials: 24.8%
  • Percentage of cash-out refinancing denials: 25.8%
  • Percentage of home improvement denials: 44.8%

A mortgage applicant’s credit history gives lenders an idea of how risky it is to loan an applicant money. Credit history is a record of how an individual repays debts, such as credit cards, mortgages, car loans, and other bills.

Fixer upper house in disrepair

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3. Collateral

  • Percentage of all denials: 19.7%
  • Total annual denials: 404,084
  • Percentage of home purchase denials: 13.9%
  • Percentage of refinancing denials: 18.5%
  • Percentage of cash-out refinancing denials: 19.6%
  • Percentage of home improvement denials: 23.4%

Insufficient collateral means that the home an applicant is trying to purchase, refinance, or borrow against is not worth enough compared to the proposed loan amount.

Mortgage loan

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4. Other

  • Percentage of all denials: 12.9%
  • Total annual denials: 265,772
  • Percentage of home purchase denials: 13.2%
  • Percentage of refinancing denials: 12.9%
  • Percentage of cash-out refinancing denials: 15.0%
  • Percentage of home improvement denials: 12.0%

The “Other” category covers all other reasons that an applicant could be denied a home loan besides the eight covered by the Home Mortgage Disclosure Act and listed here.

Woman filling out paperwork

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5. Credit application incomplete

  • Percentage of all denials: 8.9%
  • Total annual denials: 183,024
  • Percentage of home purchase denials: 8.5%
  • Percentage of refinancing denials: 14.4%
  • Percentage of cash-out refinancing denials: 14.6%
  • Percentage of home improvement denials: 4.1%

Incomplete credit applications lack the necessary information for the lender to make a credit decision, resulting in a loan denial.

Tax forms

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6. Unverifiable information

  • Percentage of all denials: 6.7%
  • Total annual denials: 137,968
  • Percentage of home purchase denials: 8.9%
  • Percentage of refinancing denials: 5.8%
  • Percentage of cash-out refinancing denials: 4.5%
  • Percentage of home improvement denials: 6.4%

Mortgage denials due to unverifiable information often arise from inaccuracies in an applicant’s employment history or tax records or discrepancies between the application and credit report.

Writing a check

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7. Insufficient cash (down payment, closing costs)

  • Percentage of all denials: 4.0%
  • Total annual denials: 82,354
  • Percentage of home purchase denials: 8.6%
  • Percentage of refinancing denials: 4.0%
  • Percentage of cash-out refinancing denials: 4.4%
  • Percentage of home improvement denials: 1.4%

Mortgage applicants must have sufficient funds to cover down payments and closing costs and fees, or lenders may deny their application.

Woman learning on the job

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8. Employment history

  • Percentage of all denials: 1.8%
  • Total annual denials: 37,567
  • Percentage of home purchase denials: 3.9%
  • Percentage of refinancing denials: 1.4%
  • Percentage of cash-out refinancing denials: 1.6%
  • Percentage of home improvement denials: 1.0%

Mortgage lenders prefer that applicants have worked in the same field for at least two years. However, a new job is not necessarily a hurdle to securing a loan as long as it pays a steady salary.

Stressed out man

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9. Mortgage insurance denied

  • Percentage of all denials: 0.1%
  • Total annual denials: 1,665
  • Percentage of home purchase denials: 0.2%
  • Percentage of refinancing denials: 0.1%
  • Percentage of cash-out refinancing denials: 0.0%
  • Percentage of home improvement denials: 0.0%

Mortgage insurance protects the lender and allows borrowers making a down payment of less than 20% to still qualify for a home loan. Applicants who are denied mortgage insurance that need it are also likely to be declined for their loan.

Detailed Findings & Methodology

A low debt-to-income ratio (DTI) is the number one reason that mortgage applications are denied. Over 37% of denied applications had a low DTI as a reason for denial. This rate is constant across home purchase loans, refinancing loans, and home improvement loans. The second most common reason for mortgage application denials is credit history, accounting for almost 35% of denials. Indeed, credit history was a reason that almost 45% of home improvement loans were denied. The third most common reason for mortgage application denials is collateral, which was cited in about one out of five mortgage denials. Together, these top three reasons account for the vast majority of mortgage denials.

Less common reasons for mortgage denials are an incomplete credit application, unverifiable information, insufficient cash, employment history, and mortgage insurance denied. While most applications list one denial reason, some applications list two or more.

To find the top reasons mortgage loans are denied, researchers at Construction Coverage analyzed the latest data from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act. The researchers ranked reasons mortgage loans are denied according to the percentage of all denials mentioning each reason. For each reason that mortgage loans are denied, researchers also calculated the total annual denials and the percentage of denials that were due to that reason for several loan types: home purchase, refinancing, cash-out refinancing, and home improvement.

Only conventional, single-family mortgage applications were considered in the analysis. In the calculation of denial rates, withdrawn and incomplete applications were excluded.

Source: constructioncoverage.com

How to Refinance Your Home Mortgage – Step-by-Step Guide

Deciding to refinance your mortgage is only the beginning of the process. You’re far more likely to accomplish what you set out to achieve with your refinance — and to get a good deal in the meantime — when you understand what a mortgage refinance entails.

From decision to closing, mortgage refinancing applicants pass through four key stages on their journey to a new mortgage loan.

How to Refinance a Mortgage on Your Home

Getting a home loan of any kind is a highly involved and consequential process.

On the front end, it requires careful consideration on your part. In this case, that means weighing the pros and cons of refinancing in general and the purpose of your loan in particular.

For example, are you refinancing to get a lower rate loan (reducing borrowing costs relative to your current loan) or do you need a cash-out refinance to finance a home improvement project, which could actually entail a higher rate?

Next, you’ll need to gather all the documents and details you’ll need to apply for your loan, evaluate your loan options and calculate what your new home mortgage will cost, and then begin the process of actually shopping for and applying for your new loan — the longest step in the process.

Expect the whole endeavor to take several weeks.

1. Determining Your Loan’s Purpose & Objectives

The decision to refinance a mortgage is not one to make lightly. If you’ve decided to go through with it, you probably have a goal in mind already.

Still, before getting any deeper into the process, it’s worth reviewing your longer-term objectives and determining what you hope to get out of your refinance. You might uncover a secondary or tertiary goal or benefit that alters your approach to the process before it’s too late to change course.

Refinancing advances a whole host of goals, some of which are complementary. For example:

  • Accelerating Payoff. A shorter loan term means fewer monthly payments and quicker payoff. It also means lower borrowing costs over the life of the loan. The principal downside: Shortening a loan’s remaining term from, say, 25 years to 15 years is likely to raise the monthly payment, even as it cuts down total interest charges.
  • Lowering the Monthly Payment. A lower monthly payment means a more affordable loan from month to month — a key benefit for borrowers struggling to live within their means. If you plan to stay in your home for at least three to five years, accepting a prepayment penalty (which is usually a bad idea) can further reduce your interest rate and your monthly payment along with it. The most significant downsides here are the possibility of higher overall borrowing costs and taking longer to pay it off if, as is often the case, you reduce your monthly payment by lengthening your loan term.
  • Lowering the Interest Rate. Even with an identical term, a lower interest rate reduces total borrowing costs and lowers the monthly payment. That’s why refinancing activity spikes when interest rates are low. Choose a shorter term and you’ll see a more drastic reduction.
  • Avoiding the Downsides of Adjustable Rates. Life is good for borrowers during the first five to seven years of the typical adjustable-rate mortgage (ARM) term when the 30-year loan rate is likely to be lower than prevailing rates on 30-year fixed-rate mortgages. The bill comes due, literally, when the time comes for the rate to adjust. If rates have risen since the loan’s origination, which is common, the monthly payment spikes. Borrowers can avoid this unwelcome development by refinancing to a fixed-rate mortgage ahead of the jump.
  • Getting Rid of FHA Mortgage Insurance. With relaxed approval standards and low down payment requirements, Federal Housing Administration (FHA) mortgage loans help lower-income, lower-asset first-time buyers afford starter homes. But they have some significant drawbacks, including pricey mortgage insurance that lasts for the life of the loan. Borrowers with sufficient equity (typically 20% or more) can put that behind them, reduce their monthly payment in the process by refinancing to a conventional mortgage, and avoid less expensive but still unwelcome private mortgage insurance (PMI).
  • Tapping Home Equity. Use a cash-out refinance loan to extract equity from your home. This type of loan allows you to borrow cash against the value of your home to fund things like home improvement projects or debt consolidation. Depending on the lender and jurisdiction, you can borrow up to 85% of your home equity (between rolled-over principal and cash proceeds) with this type of loan. But mind your other equity-tapping options: a home equity loan or home equity line of credit.

Confirming what you hope to get out of your refinance is an essential prerequisite to calculating its likely cost and choosing the optimal offer.


2. Confirm the Timing & Gather Everything You Need

With your loan’s purpose and your long-term financial objectives set, it’s time to confirm you’re ready to refinance. If yes, you must gather everything you need to apply, or at least begin thinking about how to do that.

Assessing Your Timing & Determining Whether to Wait

The purpose of your loan plays a substantial role in dictating the timing of your refinance.

For example, if your primary goal is to tap the equity in your home to finance a major home improvement project, such as a kitchen remodel or basement finish, wait until your loan-to-value ratio is low enough to produce the requisite windfall. That time might not arrive until you’ve been in your home for a decade or longer, depending on the property’s value (and change in value over time).

As a simplified example, if you accumulate an average of $5,000 in equity per year during your first decade of homeownership by making regular payments on your mortgage, you must pay your 30-year mortgage on time for 10 consecutive years to build the $50,000 needed for a major kitchen remodel (without accounting for a potential increase in equity due to a rise in market value).

By contrast, if your primary goal is to avoid a spike in your ARM payment, it’s in your interest to refinance before that happens — most often five or seven years into your original mortgage term.

But other factors can also influence the timing of your refinance or give you second thoughts about going through with it at all:

  • Your Credit Score. Because mortgage refinance loans are secured by the value of the properties they cover, their interest rates tend to be lower than riskier forms of unsecured debt, such as personal loans and credit cards. But borrower credit still plays a vital role in setting their rates. Borrowers with credit scores above 760 get the best rates, and borrowers with scores much below 680 can expect significantly higher rates. That’s not to say refinancing never makes sense for someone whose FICO score is in the mid-600s or below, only that those with the luxury to wait out the credit rebuilding or credit improvement process might want to consider it. If you’re unsure of your credit score, you can check it for free through Credit Karma.
  • Debt-to-Income Ratio. Mortgage lenders prefer borrowers with low debt-to-income ratios. Under 36% is ideal, and over 43% is likely a deal breaker for most lenders. If your debt-to-income ratio is uncomfortably high, consider putting off your refinance for six months to a year and using the time to pay down debt.
  • Work History. Fairly or not, lenders tend to be leery of borrowers who’ve recently changed jobs. If you’ve been with your current employer for two years or less, you must demonstrate that your income has been steady for longer and still might fail to qualify for the rate you expected. However, if you expect interest rates to rise in the near term, waiting out your new job could cancel out any benefits due to the higher future prevailing rates.
  • Prevailing Interest Rates. Given the considerable sums of money involved, even an incremental change to your refinance loan’s interest rate could translate to thousands or tens of thousands of dollars saved over the life of the loan. If you expect interest rates to fall in the near term, put off your refinance application. Conversely, if you believe rates will rise, don’t delay. And if the difference between your original mortgage rate and the rate you expect to receive on your refinance loan isn’t at least 1.5 percentage points, think twice about going ahead with the refinance at all. Under those circumstances, it takes longer to recoup your refinance loan’s closing costs.
  • Anticipated Time in the Home. It rarely makes sense to refinance your original mortgage if you plan to sell the home or pay off the mortgage within two years. Depending on your expected interest savings on the refinance, it can take much longer than that (upward of five years) to break even. Think carefully about how much effort you want to devote to refinancing a loan you’re going to pay off in a few years anyway.

Pro tip: If you need to give your credit score a bump, sign up for Experian Boost. It’s free and it’ll help you instantly increase your credit score.

Gathering Information & Application Materials

If and when you’re ready to go through with your refinance, you need a great deal of information and documentation before and during the application and closing processes, including:

  • Proof of Income. Depending on your employment status and sources of income, the lender will ask you to supply recent pay stubs, tax returns, or bank statements.
  • A Recent Home Appraisal. Your refinance lender will order a home appraisal before closing, so you don’t need to arrange one on your own. However, to avoid surprises, you can use open-source comparable local sales data to get an idea of your home’s likely market value.
  • Property Insurance Information. Your lender (and later, mortgage servicer) needs your homeowners insurance information to bundle your escrow payment. If it has been more than a year since you reviewed your property insurance policy, now’s the time to shop around for a better deal.

Be prepared to provide additional documentation if requested by your lender before closing. Any missing information or delays in producing documents can jeopardize the close.

Home Appraisal Blackboard Chalk Hand


3. Calculate Your Approximate Refinancing Costs

Next, use a free mortgage refinance calculator like Bank of America’s to calculate your approximate refinancing costs.

Above all else, this calculation must confirm you can afford the monthly mortgage payment on your refinance loan. If one of your aims in refinancing is to reduce the amount of interest paid over the life of your loan, this calculation can also confirm your chosen loan term and structure will achieve that.

For it to be worth it, you must at least break even on the loan after accounting for closing costs.

Calculating Your Breakeven Cost

Breakeven is a simple concept. When the total amount of interest you must pay over the life of your refinance loan matches the loan’s closing costs, you break even on the loan.

The point in time at which you reach parity is the breakeven point. Any interest saved after the breakeven point is effectively a bonus — money you would have forfeited had you chosen not to refinance.

Two factors determine if and when the breakeven point arrives. First, a longer loan term increases the likelihood you’ll break even at some point. More important still is the magnitude of change in your loan’s interest rate. The further your refinance rate falls from your original loan’s rate, the more you save each month and the faster you can recoup your closing costs.

A good mortgage refinance calculator should automatically calculate your breakeven point. Otherwise, calculate your breakeven point by dividing your refinance loan’s closing costs by the monthly savings relative to the original loan and round the result up to the next whole number.

Because you won’t have exact figures for your loan’s closing costs or monthly savings until you’ve applied and received loan disclosures, you’re calculating an estimated breakeven range at this point.

Refinance loan closing costs typically range from 2% to 6% of the refinanced loan’s principal, depending on the origination fee and other big-ticket expenses, so run one optimistic scenario (closing costs at 2% and a short time to breakeven) and one pessimistic scenario (closing costs at 6% and a long time to breakeven). The actual outcome will likely fall somewhere in the middle.

Note that the breakeven point is why it rarely makes sense to bother refinancing if you plan to sell or pay off the loan within two years or can’t reduce your interest rate by more than 1.5 to 2 percentage points.


4. Shop, Apply, & Close

You’re now in the home stretch — ready to shop, apply, and close the deal on your refinance loan.

Follow each of these steps in order, beginning with a multipronged effort to source accurate refinance quotes, continuing through an application and evaluation marathon, and finishing up with a closing that should seem breezier than your first.

Use a Quote Finder (Online Broker) to Get Multiple Quotes Quickly

Start by using an online broker like Credible* to source multiple refinance quotes from banks and mortgage lenders without contacting each party directly. Be prepared to provide basic information about your property and objectives, such as:

  • Property type, such as single-family home or townhouse
  • Property purpose, such as primary home or vacation home
  • Loan purpose, such as lowering the monthly payment
  • Property zip code
  • Estimated property value and remaining first mortgage loan balance
  • Cash-out needs, if any
  • Basic personal information, such as estimated credit score and date of birth

If your credit is decent or better, expect to receive multiple conditional refinance offers — with some coming immediately and others trickling in by email or phone in the subsequent hours and days. You’re under no obligation to act on any, sales pressure notwithstanding, but do make note of the most appealing.

Approach Banks & Lenders You’ve Worked With Before

Next, investigate whether any financial institutions with which you have a preexisting relationship offer refinance loans, including your current mortgage lender.

Most banks and credit unions do offer refinance loans. Though their rates tend to be less competitive at a baseline than direct lenders without expensive branch offices, many offer special pricing for longtime or high-asset customers. It’s certainly worth taking the time to make a few calls or website visits.

Apply for Multiple Loans Within 14 Days

You won’t know the exact cost of any refinance offer until you officially apply and receive the formal loan disclosure all lenders must provide to every prospective borrower.

But you can’t formally apply for a refinance loan without consenting to a hard credit pull, which can temporarily depress your credit score. And you definitely shouldn’t go through with your refinance until you’ve entertained multiple offers to ensure you’re getting the best deal.

Fortunately, the major consumer credit-reporting bureaus count all applications for a specific loan type (such as mortgage refinance loans) made within a two-week period as a single application, regardless of the final application count.

In other words, get in all the refinance applications you plan to make within two weeks, and your credit report will show just a single inquiry.

Evaluate Each Offer

Evaluate the loan disclosure for each accepted application with your objectives and general financial goals in mind. If your primary goal is reducing your monthly payment, look for the loan with the lowest monthly cost.

If your primary goal is reducing your lifetime homeownership costs, look for the loan offering the most substantial interest savings (the lowest mortgage interest rate).

Regardless of your loan’s purpose, make sure you understand what (if anything) you’re obligated to pay out of pocket for your loan. Many refinance loans simply roll closing costs into the principal, raising the monthly payment and increasing lifetime interest costs.

If your goal is to get the lowest possible monthly payment and you can afford to, try paying the closing costs out of pocket.

Choose an Offer & Consider Locking Your Rate

Choose the best offer from the pack — the one that best suits your objectives. If you expect rates to move up before closing, consider the lender’s offer (if extended) to lock your rate for a predetermined period, usually 45 to 90 days.

There’s likely a fee associated with this option, but the amount saved by even marginally reducing your final interest rate will probably offset it. Assuming everything goes smoothly during closing, you shouldn’t need more than 45 days — and certainly not more than 90 days — to finish the deal.

Proceed to Closing

Once you’ve closed on the loan, that’s it — you’ve refinanced your mortgage. Your refinance lender pays off your first mortgage and originates your new loan.

Moving forward, you send payments to your refinance lender, their servicer, or another company that purchases the loan.


Final Word

If you own a home, refinancing your mortgage loan is likely the easiest route to capitalize on low interest rates. It’s probably the most profitable too.

But low prevailing interest rates aren’t the only reason to refinance your mortgage loan. Other common refinancing goals include avoiding the first upward adjustment on an ARM, reducing the monthly payment to a level that doesn’t strain your growing family’s budget, tapping the equity you’ve built in your home, and banishing FHA mortgage insurance.

And a refinance loan doesn’t need to achieve only one goal. Some of these objectives are complementary, such as reducing your monthly payment while lowering your interest rate (and lifetime borrowing costs).

Provided you make out on the deal, whether by reducing your total homeownership costs or taking your monthly payment down a peg, it’s likely worth the effort.

*Advertisement from Credible Operations, Inc. NMLS 1681276.Address: 320 Blackwell St. Ste 200, Durham, NC, 27701

Source: moneycrashers.com